Hang Seng Indexes Company and Markit have launched the Hang Seng Markit iBoxx Offshore RMB Bond Index family (HSM iBoxx).
The bond index series will track the performance of offshore renminbi (RMB) sovereign and corporate debt using an enhanced methodology for the treatment of unrated bonds alongside comprehensive breakdowns by bond tenor and rating.
The HSM iBoxx is built on the iBoxx principles of transparency, independence, open access and multi-sourced pricing. The methodology reflects specific characteristics of the offshore RMB bond market based on feedback from more than 15 asset managers and banks. Key features of the index family include:
• A specific methodology to handle the treatment of unrated bonds, which currently account for up to a third of the index constituents. This allows investors to include unrated bonds in their analysis of the investment grade and high yield portions of the market
• The incorporation of bonds in the index family until maturity. This reflects the short-term structure of many issues in the offshore RMB market, with a typical maturity of three years
• A comprehensive breakdown of the bond universe based on tenor, credit quality, sector and size
Offshore RMB debt is one of the fastest growing bond markets in the world. The aggregate notional value tracked by the index increased by 27 per cent year-on-year to RMB237 billion in 2013, and by a further 33 per cent this year to RMB316 billion as at 30 September 2014.
Vincent Kwan, director and general manager of Hang Seng Indexes, says: “We are delighted to be launching the Hang Seng Markit iBoxx Offshore RMB Bond Index family in partnership with Markit. By combining Hang Seng Indexes’ strong knowledge of Asian markets with Markit’s extensive global fixed income expertise, this index family meets the specific needs of regional and international investors who wish to track the performance of offshore RMB bonds. This asset class is growing rapidly in Hong Kong and we are excited to include it in our extensive range of index solutions.”
Brad Hunt, managing director and head of information in Asia Pacific at Markit, says: “Partnering with Hang Seng Indexes allows us to leverage their unrivalled network of market participants in Greater China to promote this new index family, which will aid price discovery across the region. This launch follows the recent addition of the Markit iBoxx SGD indices to our Asian fixed income offering last year and highlights our commitment to providing independent fixed income indices for customers active in the Asia Pacific region.”
The indices will be operated in compliance with the IOSCO Principles for Financial Benchmarks and are underpinned by Markit’s independent bond-pricing service which is based on a broad set of bond prices received throughout the trading day from market participants. The prices are subject to a rigorous series of quality controls before consolidated bid and ask prices are calculated, used for index calculation and published for every bond in the Markit bond universe, along with a range of analytical values.
The HSM iBoxx currently includes more than 600 indices covering sovereign, sub-sovereign and corporate debt issuers across sectors, ratings and maturity segments. The combined total debt tracked through the index family is about RMB300 billion. Approximately 67 per cent of the non-sovereign debt included in the indices carries investment grade ratings and 13 per cent have a high yield rating, while 20 per cent of the bonds are not rated.
End-of-day closing values of the HSM iBoxx will be disseminated once a day, beginning on 20 October 2014. The index family is calculated every Monday to Friday.
